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Does investing more money into stocks increase chances of profit? | I think you are mixing up the likelihood of making a profit with the amount of profit. The likelyhood of profit will be the same, because if you buy $100 worth of shares and the price moves up you will make a profit. If you instead bought $1000 worth of the same shares at the same price and the price moved up you would once again make a profit. In fact if you don't include commissions and other fees, and you buy and sell at the same prices, you percentage profit would be the same. For example, if you bought at $10 and sold at $12, you percentage gain of 20% would be the same no matter how many shares you bought (not including commissions). So if you bought $100 worth your gain would have been 20% or $20 and if you bought $1000 worth your gain would have been 20% or $200. However, if you include commissions, say $10 in and $10 out, your net profit on $100 would have been $0 (0%) and your net profit on $1000 would have been $180 (18%). |
Why are the banks and their customers in the United States still using checks? [duplicate] | Check use is declining here too, but it still has some practical advantages over electronic means: |
Problems with Enterprise Value and better valuation techniques | This is a tough question SFun28. Let's try and debug the metric. First, let's expand upon the notion share price is determined in an efficient market where prospective buyers and sellers have access to info on an enterprises' cash balance and they may weigh that into their decision making. Therefore, a desirable/undesirable cash balance may raise or lower the share price, to what extent, we do not know. We must ask How significant is cash/debt balance in determining the market price of a stock? As you noted, we have limited info, which may decrease the weight of these account balances in our decision process. Using a materiality level of 5% of net income of operations, cash/debt may be immaterial or not considered by an investor. investors oftentimes interpret the same information differently (e.g. Microsoft's large cash balance may show they no longer have innovative ideas worth investing in, or they are well positioned to acquire innovative companies, or weather a contraction in the sector) My guess is a math mind would ignore the affect of account balances on the equity portion of the enterprise value calculation because it may not be a factor, or because the affect is subjective. |
Why buy insurance? | For big values the loss becomes negligible. Say you have a 10% chance to get 10 million $/€/Whatever, expected value 1m. You sell that chance for 990k, which loses you 10k of expected income. Why would you throw away 10k? Because in the face of getting almost 1m the 10k are insignificant, 1m and 990k will make you roughly equally rich. Also the richness increase from 1m to 10m is less than 10x since 1m gives you maybe 90% of the freedom that 10m does (depending on how well you can make 10m work for you, most people will just let it rot in the bank). Another way to look at it is to look at bankruptcy risk. Say I have 10k in the bank, which is nice. Those 10k cannot pay for a new house or 2 cars (mine and the one I hit), so I have a small risk of significant loss. If I buy an insurance I reduce my chance of going bankrupt from maybe 0.001% to 0% for a fairly small price. Usually you can buy insurance fairly cheap if you raise your deductible to maybe 5k (both for the house and the car) so that you shoulder the risk you can (shouldering risk = gaining money) and paying an insurance to shoulder the rest for you. That way you minimize the cost to remove the risk of bankruptcy. It makes sense to shoulder as much risk as you can (unless a fixed fee of the insurance makes in unfeasible) before paying others to do it for you so you can optimize your income while removing fatal risks. |
Is 6% too high to trade stocks on margin? | Okay so we are assuming that you can sustain 6% or more return on your investments. Personally I would compare that rate to what lines of credit are going for and do what ever is least expensive. Either way your risk is the same. Your net worth is the same. Your assets will be the same. Your liabilities will be the same. Its just a matter of who you owe it to and what the rate is. Don't be afraid of having a second mortgage. If the stocks go down either way you have to sell what's left and pay your debt. Or what I should maybe say is don't be more afraid of a line of credit more than margin in your investment account. |
What is a decent rate of return for investing in the markets? | Don't ever, ever, ever let someone else handle your money, unless you want somebody else have your money. Nobody can guarantee a return on stocks. That's utter bullshit. Stock go up and down according to market emotions. How can your guru predict the market's future emotions? Keep your head cool with stocks. Only buy when you are 'sure' you are not going to need the money in the next 10 years. Buy obligations before stocks, invest in 'defensive' stocks before investing in 'aggressive' stocks. Keep more money in obligations and defensive stock than in aggressive stocks. See how you can do by yourself. Before buying (or selling) anything, think about the risks, the market, the expert's opinion about this investment, etc. Set a target for selling (and adjust the target according to the performance of the stock). Before investing, try to learn about investing, really. I've made my mistakes, you'll make yours, let's hope they're not the same :) |
How can I determine if my portfolio's rate of return has been “good”, or not? | It's important to realize that any portfolio, if sufficiently diversified should track overall GDP growth, and anything growing via a percentage per annum is going to double eventually. (A good corner-of-napkin estimate is 70/the percentage = years to double). Just looking at your numbers, if you initially put in the full $7000, an increase to $17000 after 10 years represents a return of ~9.3% per annum (to check my math $7000*1.09279^10 ≈ $17000). Since you've been putting in the $7000 over 10 years the return is going to be a bit more than that, but it's not possible to calculate based on the information given. A return of 9.3% is not bad (some rules of thumb: inflation is about 2-4% so if you are making less than that you're losing money, and 6-10% per annum is generally what you should expect if your portfolio is tracking the market)... I wouldn't consider that rate of return to be particularly amazing, but it's not bad either, as you've done better than you would have if you had invested in an ETF tracking the market. The stock market being what it is, you can't rule out the possibility that you got lucky with your stock picks. If your portfolio was low-risk, a return of 9%ish could be considered amazing, but given that it's about 5-6 different stocks what I'd consider amazing would be a return of 15%+ (to give you something to shoot for!) Either way, for your amount of savings you're probably better off going with a mutual fund or an ETF. The return might be slightly lower, but the risk profile is also lower than you picking your stocks, since the fund/ETF will be more diversified. (and it's less work!) |
Do financial advisors get better deals on mortgages? | Yes, maybe for themselves, but for you that depends on quite a number of things. But not all advisors are scum, but accept the fact that you are their cash cow and you are there for their takings. Some advisors are true to their professions and advise ethically, trying to get the best for their clients. So search for a good advisor rather than a cheap one. And regarding the mortgage you are talking about, the mortgage provider and the mortgage taker don't deal directly, but use their solicitors. Every party wants the least of legal hassles for their transactions and get the best legal help. The financial advisor maybe both rolled into one or he has legal practitioners in his firm who would do the legal job after he takes care of the financial matters. Seems a cost effective workshop. |
Are buying and selling futures based on objective data? | Let's ask another question: Why do you buy X at price $Y? Here are some answers: Now, another question: Are you guaranteed to get at least $Y worth of value when you buy X? Of course not! A lot of things can happen. Your car can be a lemon. Your pedigreed Dachshund can get run over by a snowblower. Or, the prices of the underlying commodity or security can go against your futures contract. You can raise your chances of getting appropriate value out of X by doing your homework and hedging your risk. The more homework you do, the less of a gamble you're taking. |
Contract job (hourly rate) as a 1099: How much would I be making after taxes? | If it's just you working, I'd use a ballpark figure of 35% owed - it may be a little high or low, but it's a safe margin to keep set aside for paying your liabilities at the end of the year. |
UK: Personal finance book for a twenty-something | I would always recommend the intelligent investor by Benjamin Graham the mentor of warren buffet once you have a basic knowledge ie what is a share bond guilt etc In terms of pure investment the UK is fairly similar the major difference is the simpler tax structure, ISA allowance and the more generous CGT regime. |
How are stock buybacks not considered insider trading? | Another way to look at this is that pure insider trading is an activity with the aim to use secret information to make personal profit or let others make personal profit at the expense of the company shareholders or investors. In buybacks, it is not company managers to get personal gain in this would-be "insider trading". The end-winners in this case are the shareholders. So there is nothing inherently bad in buying back stock. Moreover, it is a general practice to buy shares back (as opposed to paying dividends) when the company sees its shares being undervalued (of course, provided that it has the cash/borrowing ability to implement this), since it creates shareholders value, thereby maximising shareholder wealth, which is one of the primary tasks of the company managers. |
Is this investment opportunity problematic? | Adding to what others have said, if the mortgage for the new house is backed by the federal government (e.g., through FHA or is to be sold to Fannie Mae/Freddie Mac) you would be violating 18 USC § 1001, which makes making intentionally false statements to any agent or branch of the federal government a crime punishable by up to 5 years' imprisonment. The gift letter you are required to sign will warn you of as much. Don't do it, it's not worth the risk of prison time. |
Does an employee have the right to pay the federal and state taxes themselves instead of having employer doing it? | You can file a revised W-4 with your employer claiming more allowances than you do now. More allowances means less Federal tax and (if applicable and likely with a separate form) less state tax. This doesn't affect social security and Medicare with holding, though. That being said, US taxes are on a pay-as-you-go system. If the IRS determines that you're claiming more allowances than you're eligible for and not paying the proper taxes throughout the year, they will hit you with an underpayment penalty fee, which would likely negate the benefits of keeping that money in the first place. This is why independent contractors and self-employed people pay quarterly or estimated taxes. Depending on the employer, they may require proof of the allowances for adjustment before they accept the revised W-4. |
Are these scenarios considered as taxable income? | For case 1, there is no tax due as you sold the book for less than your cost basis. If you had sold for more than $100, then you would have had a profit. For case 2, that depends on the value of the gift card with respect to the value of your fare. Most likely that gift card is less than the cost of the fare. And in that case it would generally be treated as a reduction in the purchase price. The same way that rebates and cash back on credit card are treated. Note if for some reason a 1099 was generated that would change the situation and you would need to consult a tax professional. Since that would indicate that the other party to the transaction had a different view of the situation. |
What does “balance sheet banks” mean in this context? | The balance sheet for a bank is the list of assets and liabilities that the bank directly is responsible for. This would be things like loans the bank issues and accounts with the bank. Banks can make both "balance sheet" loans, meaning a loan that says on the balance sheet - one the bank gains the profits from but holds the risks for also. They can also make "off balance sheet" loans, meaning they securitize the loan (sell it off, such as the mortgage backed securities). Most major banks, i.e. Chase, Citibank, etc., could be called "balance sheet" banks because at least some portion of their lending comes from their balance sheet. Not 100% by any means, they participate in the security swaps extensively just like everyone does, but they do at least some normal, boring lending just as you would explain a bank to a five year old. Bank takes in deposits from account holders, loans that money out to people who want to buy homes or start businesses. However, some (particularly smaller) firms don't work this way - they don't take responsibility for the money or the loans. They instead "manage assets" or some similar term. I think of it like the difference between Wal-Mart and a consignment store. Wal-Mart buys things from its distributors, and sells them, taking the risk (of the item not selling) and the reward (of the profit from selling) to itself. On the other hand, a consignment store takes on neither: it takes a flat fee to host your items in its store, but takes no risk (you own the items) nor the majority of the profit. In this case, Mischler Financial Group is not a bank per se - they don't have accounts; they manage funds, instead. Note the following statement on their Services page for example: Mischler Financial Group holds no risk positions and no unwanted inventory of securities, which preserves the integrity of our capital and assures our clients that we will be able to obtain bids and offers for them regardless of adverse market conditions. They're not taking your money and then making their own investments; they're advising you how to invest your money, or they're helping do it for you, but it's your money going out and your risk (and reward). |
What are “trailing 12-month total returns”? | ( t2 / t1 ) - 1 Where t2 is the value today, t1 is the value 12 months ago. Be sure to include dividend payments, if there were any, to t2. That will give you total return over 12 months. |
Will a credit card issuer cancel an account if it never incurs interest? | Some years ago a call center operator told me a bit more than they probably should have. They like to see a lot of money go through the card, but very little staying on the card. Yes, they make money on the interest but one card defaulting blows away the profit on a lot of other cards. The 3% take from the merchants is both reliable and up-front, not 6 months down the line when (and if) you pay the interest. So if you want to make your credit card company happy, pay your bills in full every month. I have credit far beyond my actual means because I run work expenses on my personal card, I was told they didn't care (and had already guessed) that it wasn't my money. The point was I was handling things in a way they liked. Not quite at Palladium status, but cards with $200 annual fees are mine for the asking, and I haven't paid interest since the early 1990's. |
Question about Tax Information from a Prospectus | At the end of each calendar year the mutual fund company will send you a 1099 form. It will tell you and the IRS what your account earned. You will see boxes for: You will end up paying taxes on these, unless the fund is part of a 401K or IRA. These taxes will be due even if you never sold any shares. They are due even if it was a bad year and the value of your account went down. Most if not all states will levy an income tax yon your dividends and capital gains each year. When you sell your shares you may also owe income taxes if you made a profit. The actual taxes due is a more complex calculation due to long term vs short term, and what other gains or losses you have. Partial sales also take into account which shares are sold. |
As a 22-year-old, how risky should I be with my 401(k) investments? | Whatever you do, don't take your retirement savings to Vegas. Second, you should also consider investment expenses. Your investments profit after the managers pay themselves. Get the lowest expense ratio mutual funds you can. Third, most active managers do not beat the market. Index funds are your friends. They also tend to have the lower expense ratios. |
Car dealer saying that they cannot see any credit information for my co-applicant. Could this be a scam? | I actually had a similar situation when I tried to buy my house. I paid off all my loans and was proud of my "debt free" status. I had no car note, no student loans... absolutely no debt, but I did have a bank-issued credit card. (USAA, not Chase, but I assume the same may apply). When I tried to get a home loan they told me I had "absolutely no information on my credit report." AKA I had no credit. The mortgage lender had no idea what was going on, nor did I or anybody else. It took a lot of research before I realized that the credit bureaus use a formula for the credit rating that involves a lot of things, but if you haven't had a current line of credit reported to the agency in over a year (maybe it was longer, I didn't have anything for 3 years) you aren't going to have a credit score. Because I was "debt free" I was also credit report free and eventually the credit bureaus had nothing to go on, and my score disappeared. The bank-issued credit card was on my credit report, but they didn't report monthly balances so the bureaus couldn't use it to determine if I was paying off the card or if I even had a balance on it. It was essentially not doing my credit any favors, despite what I had thought. In short, based on the fact that you have no debt in her name, and you have taken on all debt in your own name, its very plausible that she has no credit rating anymore. It won't take long to get it back. Once you have ANYTHING on your credit that's actually reported the formula can kick back in and look at credit history as well as current credit and she'll be fine. |
Sage Instant Accounts or Quickbooks? | The company I work with uses Intuit QuickBooks Online and have had zero problems with it. The functionality is effective and it fits the size of our company as well. (Not huge, but I wouldn't consider it a 'small business') Also, you can try a 30 day free trial. QuickBooks Simple Start focuses on small business accounting, so for this reason it has a cleaner interface and is simple to use. QuickBooks Simple Start compared to Quicken Home This article doesn't exactly have a bright light shining on Quickbooks, but I think it's fair to show you other alternatives: http://www.pcmag.com/article2/0,2817,2382514,00.asp [Note that it is from 2011] |
Fringe Benefits (Lodging) for single member S-Corp | If you use "a room or other separately identifiable space" within your apartment exclusively for your business, then you might be able to recoup a fraction of your rent for that. Check the rules for home office at the IRS and adopt a consistent and well-documented approach. (I would pay your full rent out of your personal account, and then do an "expense report" for the portion that's legitimately business related, but that's not a unique approach.) Other than that, I agree with the answer by litteadv - You cannot reduce your tax by the full amount of your rent just by having the S Corp pay, and trying to do so is probably playing with fire. Generally speaking, don't comingle business and personal expenses like that. |
Want to buy expensive product online. Credit line on credit cards not big enough. How do “Preferred Account” programs work? | The preferred accounts are designed to hope you do one of several things: Pay one day late. Then charge you all the deferred interest. Many people think If they put $X a month aside, then pay just before the 6 months, 12 moths or no-payment before 2014 period ends then I will be able to afford the computer, carpet, or furniture. The interest rate they will charge you if you are late will be buried in the fine print. But expect it to be very high. Pay on time, but now that you have a card with their logo on it. So now you feel that you should buy the accessories from them. They hope that you become a long time customer. They want to make money on your next computer also. Their "Bill Me Later" option on that site as essentially the same as the preferred account. In the end you will have another line of credit. They will do a credit check. The impact, both positive and negative, on your credit picture is discussed in other questions. Because two of the three options you mentioned in your question (cash, debit card) imply that you have enough cash to buy the computer today, there is no reason to get another credit card to finance the purchase. The delayed payment with the preferred account, will save you about 10 dollars (2000 * 1% interest * 0.5 years). The choice of store might save you more money, though with Apple there are fewer places to get legitimate discounts. Here are your options: How to get the limit increased: You can ask for a temporary increase in the credit limit, or you can ask for a permanent one. Some credit cards can do this online, others require you to talk to them. If they are going to agree to this, it can be done in a few minutes. Some individuals on this site have even been able to send the check to the credit card company before completing the purchase, thus "increasing" their credit limit. YMMV. I have no idea if it works. A good reason to use the existing credit card, instead of the debit card is if the credit card is a rewards card. The extra money or points can be very nice. Just make sure you pay it back before the bill is due. In fact you can send the money to the credit card company the same day the computer arrives in the mail. Having the transaction on the credit card can also get you purchase protection, and some cards automatically extend the warranty. |
How are people able to spend more than what they make, without going into debt? | I don't know about Jeff Bezos in particular but, in general, and with a a few other notorious exceptions like Warren Buffet, billionaires also have incomes (salary, dividends, fees to seat on various boards of directors, etc.) in the millions, not the tens of thousand. That's typically still much lower than their wealth but certainly enough to sustain a comfortable lifestyle. However it's still true that some billionaires have so much of their wealth tied up in a single corporation that they could not practically get it all out at once, if they ever wanted to. But they can still typically sell at least some shares, which is exactly what Jeff Bezos has done to buy the Washington Post for example. |
Is expense to freelancers tax deductible? | Yes, but make sure you issue a 1099 to these freelancers by 1/31/2016 or you may forfeit your ability to claim the expenses. You will probably need to collect a W-9 from each freelancer but also check with oDesk as they may have the necessary paperwork already in place for this exact reason. Most importantly, consult with a trusted CPA to ensure you are completing all necessary forms correctly and following current IRS rules and regulations. PS - I do this myself for my own business and it's quite simple and straight forward. |
Zero volatility stocks in intraday trading in India | you need to use easy programming language to imply onto a scan where you enter Scan all stocks display if volume < (less than) 100 |
Why buy insurance? | The definition of insurance is the transfer of risk. Thus, you're paying for transferring of a risk (of an item/property) to the insurer (carrier), so that they bear the financial burden of a loss/accident and not you. You could always self-insure, but a lot of times, insurance is cheaper, since due to the "Law of Large Numbers" the insurer can just charge a premium that is small percentage in comparison to the cost of self-insuring. |
How does one typically exit (close out) a large, in-the-money long put option position? | While open interest usually correlates to volume, the mark of liquidity is the bid ask spread. Even when trading options with spreads as large as an ask 2x the bid, a more realistic price that traders are willing to accept lies somewhere in the middle. Any option can easily be exited at intrinsic value: underlying price - exercise price for calls, exercise price - underlying price for puts. For illiquid options, this will be the best price obtained. For longer term options, something closer to the theoretical price is still possible. If an underlying is extremely liquid, yet the options aren't quite then options traders will be much more ready to trade at the theoretical price. For exiting illiquid options, small, < 4 contracts, and infrequent, > 30 minute intervals, orders are more likely to be filled closer to the theoretical price; however, if one's sells are the only trades, traders on the other side will take note and accept ever lowering implied volatilities. With knowledge of what traders will accept, it is always more optimal to trade out of options rather than exercise because of the added costs and uncertainty involved with exercising and liquidating. |
Is it possible to buy stock as a gift for a minor without involving the guardians? | This is an old question, but a new product has popped up that provides an alternative answer. There is a website called stockpile.com that allows you to purchase "stock gift certificates" for others. These come in both electronic and traditional physical form. This meets my question's original criteria of a gift giver paying for stock without having any of the recipient's personal information and thus maintaining the gift's surprise. I should note a few things about this service: Despite these limitations I wanted to post it here so others were aware of it as an option. If no other alternative will work and this is what it takes to get a parent interested in teaching their child to invest, then it's well worth the costs. |
Any experience with maxing out 401(k)? | I second CrimsonX's advice to max out Roth then 401k. At your age in what sounds like a similar situation I did the same thing -- thankfully. It's easier to do when you're young and unencumbered. 10 years later with kids, house, changing from double to single income, job changes, etc, it's harder to max out retirement accounts. Not to mention that priorities change, e.g. saving for college. |
Is technical analysis based on some underlying factors in the market or do they work simply because other people use them? | Both explanations are partly true. There are many investors who do not want to sell an asset at a loss. This causes "resistance" at prices where large amounts of the asset were previously traded by such investors. It also explains why a "break-through" of such a "resistance" is often associated with a substantial "move" in price. There are also many investors who have "stop-loss" or "trailing stop-loss" "limit orders" in effect. These investors will automatically sell out of a long position (or buy out of a short position) if the price drops (or rises) by a certain percentage (typically 8% - 10%). There are periods of time when money is flowing into an asset or asset class. This could be due to a large investor trying to quietly purchase the asset in a way that avoids raising the price earlier than necessary. Or perhaps a large investor is dollar-cost-averaging. Or perhaps a legal mandate for a category of investors has changed, and they need to rebalance their portfolios. This rebalancing is likely to take place over time. Or perhaps there is a fad where many small investors (at various times) decide to increase (or decrease) their stake in an asset class. Or perhaps (for demographic reasons) the number of investors in a particular situation is increasing, so there are more investors who want to make particular investments. All of these phenomena can be summarized by the word "momentum". Traders who use technical analysis (including most day traders and algorithmic speculators) are aware of these phenomena. They are therefore more likely to purchase (or sell, or short) an asset shortly after one of their "buy signals" or "sell signals" is triggered. This reinforces the phenomena. There are also poorly-understood long-term cycles that affect business fundamentals and/or the politics that constrain business activity. For example: Note that even if the markets really were a random walk, it would still be profitable (and risk-reducing) to perform dollar-cost-averaging when buying into a position, and also perform averaging when selling out of a position. But this means that recent investor behavior can be used to predict the near-future behavior of investors, which justifies technical analysis. |
Is it normal to think of money in different “contexts”? | Here's how I think about money. There are only 3 categories / contexts (buckets) that my earned money falls into. Savings is my emergency fund. I keep 6 months of total expenses (expenses are anything in the consumption bucket). You can be as detailed as you want with this area but I tend to leave a fudge factor. In other words, if I estimate that I spend approximately $3,000 a month in consumption dollars then I'll save $3,500 times 6 in the bank. This money needs to be liquid. Some people use a HELOC, other people use their ROTH contributions. In any case, you need to put this money some place you can get access to it in case you go from accumulation (income exceed expenses) to decumulation mode (expenses exceed income). This money is distinct from consumption which I will cover in paragraph three. Investments are stocks, bonds, income producing real estate, small businesses, etc. These dollars require a strategy. The strategy can include some form of asset allocation but more importantly a timeline. These are the dollars that are working for you. Each dollar placed here will multiply over time. Once you put a dollar here it shouldn't be taken out unless there is some sort of catastrophe that your savings can't handle or your timeline has been achieved. Notice that rental real estate is included so liquidating stocks to purchase rental real estate is NOT considered removing investment dollars. Just reallocating based on your asset allocation. This bucket includes 401k's, IRAs, all tax-sheltered accounts, non-sheltered brokerage accounts, and rental real estate. In general your primary residence is not included in this bucket. Some people include the equity of their primary residence in the investment column but it can complicate the equation and I prefer to leave it out. The consumption bucket is the most important bucket and the one you spend the most time with. It requires a budget. This includes your $5 magazine and your $200 bottle of wine. Anything in this bucket is gone. You can recover a portion of it by selling it on ebay for $3 (these are earned dollars) but the original $5 is still considered spent. The reason your thought process in this area is distinct from the other two, the decisions made in this area will have the biggest impact on your personal finances. Warren Buffett was famous for skimping on haircuts because they are worth thousands of dollars down the road if they are invested instead. Remember this is a zero-sum game so every $1 not consumed is placed in one of the other buckets. Once your savings bucket is full every dollar not consumed is sent to investments. Remember to include everything that does not fit in the other two buckets. Most people forget their car insurance, life insurance, tax bill at the end of the year, accountant bill, etc. In conclusion, there are three buckets. Savings, which serve as your emergency bucket. This money should not be touched unless you switch from accumulation to decumulation. Investments, which are your dollars that are working for you over time. They require a strategy and a timeline. Consumption, which are your monthly expenses. These dollars keep you alive and contribute to your enjoyment. This is a short explanation of my use of money. It can get as complicated and detailed as you want it to be but as long as you tag your dollars correctly you'll be okay IMHO. HTH. |
Are stock prices likely drop off a little bit on a given friday afternoon? | It is called the Monday Effect or the Weekend Effect. There are a number of similar theories including the October Effect and January Effect. It's all pretty much bunk. If there were any truth to traders would be all over it and the resulting market forces would wipe it out. Personally, I think all technical analysis has very little value other than to fuel conversations at dinner parties about investments. You might also consider reading about Market efficiency to see further discussion about why technical approaches like this might, but probably don't work. |
Looking for advice on rental property | You say that one property is 65% of the value of the two properties and the other is 35%. But how much of that do the two of you actually own? If you have co-signed mortgages on both properties, then your equity is going to be lower. If you sold both properties, then your take away would be just half of that equity. And while the 35% property may be less valuable, if you bought it first, it may actually have more equity. It's the equity that matters here, not the value of the property. With a mortgage, the bank is more of an owner than you are until you've paid down most of the loan. You may find that the bank won't agree to a single-owner refinance. A co-signed mortgage is a lot easier for them to collect, as they can hold either of you responsible for the entire loan. If you sell the 65% property, then you can pay off any mortgage on that property and use the equity payout from that to buy out your relative on the 35% property. If you currently have no mortgage, you'd even have cash back. This is your fewest strings option. Let's say that you have no mortgage now. So this mortgage would be the only mortgage on the property. It's not so much, as 15:65 is 3:13 or 18.75% of the value of the property. That's more of a home equity loan than a mortgage. You should be able to get a good rate. It might reduce your short term profit, but it should be survivable if you have other income. If you don't have other income, then seriously consider selling the 65% property and diversifying the payout into something else. E.g. stocks and bonds. Perhaps your relative would be willing to float you the loan. That would save you bank fees and closing costs. Write up a contract and agree to take assignment of the title at payoff. You'll need to pay a lawyer to write up the contract (paying a modest amount now to cover the various future possibilities), but that should still be cheaper. There's a certain amount of trust required on both sides, but this gives you some separation. And of course it takes your relative out of the day-to-day management entirely. Perhaps the steady flow of cash would provide what they need. If your relative is willing to remain that involved, that can work. Note that they may not want to do this, so don't get too attached to the idea. Be prepared for a no. This would be a great option for you, as you pretty much get everything you have now. They get back the time meeting with you to make decisions, but they also give up control over those decisions. Some people would not like that tradeoff. The one time I was involved with a professional managing a property for me, the fee was around 7% of the rent. If that fits your area, you might reasonably charge 5%. That gives a discount for family and not being a professional. There's a relatively easy way to find out what fits your area. Look around and see what companies offer multiple listings. Call until you find a couple that will do management for you. Get quotes for managing your properties. Now you'll know the amounts. The big failing though is that this may not describe the issue that your relative has. If the real problem is that the two of you have different approaches to property management, then making you the only decision maker may be the wrong direction. This is certainly financially feasible, but it still may not be the right solution for your relationship. If you get a no on this, I'd recommend moving on to other solutions immediately. This may simply be too favorable to you. |
Is there a way to set a stop for a stock before you own it? | Yes it is possible, as long as the broker you use allows conditional orders. I use CMC Markets in Australia, and they allow free conditional orders either when initially placing a buy order or after already buying a stock. See the Place New Order box below: Once you have selected a stock to buy, the number of shares you want to buy and at what price you can place up to 3 conditional orders. The first condition is a "Place order if..." conditional order. Here you can place a condition that your buy order will only be placed onto the market if that condition is met first. Say the stock last traded at $9.80 and you only want to place your order the next day if the stock price moves above the current resistance at $10.00. So you would Place order if Price is at or above $10.00. So if the next day the price moves up to $10 or above your order will be placed onto the market. The second condition is a "Stop loss" conditional order. Here you place the price you want to sell at if the price drops to or past your stop loss price. It will only be placed on to the market if your buy order gets traded. So if you wanted to place your stop loss at $9.00, you would type in 9.00 in the box after "If at or below ?" and select if you want a limit or market order. The third condition is a "Take profit" conditional order. This allows you to take profits if the stock reaches a certain price. Say you wanted to take profits at 50%, that is if the price reached $15.00. So you would type in 15.00 in the box after "If at or above ?" and again select if you want a limit or market order. These conditional orders can all be placed at the time you enter your buy order and can be edited or deleted at any time. The broker you use may have a different process for entering conditional orders, and some brokers may have many more conditional orders than these three, so investigate what is out there and if you are confused in how to use the orders with your broker, simply ask them for a demonstration in how to use them. |
Why real estate investments are compared via “cap rate”? | Cap Rate is the yearly return NOT including your mortgage. Everyone will finance the property differently. From 0% - 100% down. This is why Cap Rate is the best way to compare properties. Once you include your finance it is then called Cash-On Cash Return (CCR). |
Is debt almost always the cause of crashes and recessions? | The root cause can be said to always be a crisis in confidence. It may be due to a very real event. However, confidence is what pushes the markets up and worries are what bring them down. |
How to invest a small guaranteed monthly income? | In my opinion, you can't save too much for retirement. An extra $3120/yr invested at 8% for 30 years would give you $353K more at retirement. If your "good amount in my 401k" is a hint that you don't want us to go in that direction, then how about saving for the child's college education? 15 years' savings, again at 8% will return $85K, which feels like a low number even in today's dollars, 15 years of college inflation and it won't be much at all. Not sure why there's guilt around spending it. If one has no debt, good retirement savings level, and no pressing need to save for something else, enjoying one's money is an earned reward. Even so, if you want a riskless 'investment' just prepay the mortgage. You'll see an effective return of the mortgage rate, 4%(?) or so, vs the .001% banks are paying. Of course, this creates a monthly windfall once the mortgage is paid off, but it buys you time to make this ultimate decision. In the end, I'd respond that similar to Who can truly afford luxury cars?, one should produce a budget. I don't mean a set of constraints to limit spending in certain categories, but rather, a look back at where the money went last year and even the year before that. What will emerge are the things that are normal, the utility bills, tax bill, mortgage, etc, as well as the discretionary spending. If all your current saving is on track, the investment may be in experiences, not financial products. |
Options price vs implied volatility - who drives who? | Currently, when "implied volatility" is spoken, the Black-Scholes-Merton model is implied. This model has been shown to be deficient, thus the Variance Gamma Model should be used. However, as nearly no one uses VG, it can be assumed that BS is still being implied. The BS formula has multiple variables. Some are external to the underlying in question. The rest are internal. When all but one variable is known or assumed, the last variable can be calculated, so if one has the price of the underlying and all else except the volatility, the volatility can be calculated thus implied. If one selects an implied volatility, and all variables except the underlying price is known, the underlying price can be calculated. For the present, one uses the current price of the underlying to calculate the implied volatility. For future option prices, one assumes an implied volatility at a later date to calculate a possible price. For prices not at the money, the BS model is extremely imprecise. The VG model can better determine a potential future price. |
In a competitive market, why is movie theater popcorn expensive? | I'm kind of shocked that no formal behavioral modeling has been proposed as an explanation yet. One such model would be steep (hyperbolic, quasi-hyperbolic) discounting. Consumers would rather pay for popcorn later than for an expensive movie ticket now. For instance, consumers might when purchasing the ticket see a low value of popcorn and view the ticket price as the whole price because they do not predict purchasing popcorn. Then when entering the theater, the present value of popcorn is very high and they purchase it. There might therefore be a market for a commitment device (such as a popcornless theater) to make the appropriate decision ex-ante. Another commitment device that seems to be practiced is when individuals sneak their own popcorn into the theater. They may not actually want the popcorn, but by bringing their own they ensure they do not purchase the theater's. |
Newbie question - Brokerage and selling shares | Capital gains tax is an income tax upon your profit from selling investments. Long-term capital gains (investments you have held for more than a year) are taxed significantly less than short-term gains. It doesn't limit how many shares you can sell; it does discourage selling them too quickly after buying. You can balance losses against gains to reduce the tax due. You can look for tax-advantaged investments (the obvious one being a 401k plan, IRA, or equivalent, though those generally require leaving the money invested until retirement). But in the US, most investments other than the house you are living in (which some of us argue isn't really an investment) are subject to capital gains tax, period. |
Does the IRS reprieve those who have to commute for work? | You cannot deduct expenses directly. However, your employer may participate in programs to allow you to make a pretax deduction capped at $255 per month to pay for certain commuting expenses. For personal car commuters the main category is to pay for parking. IRS guidelines Qualified Transportation Benefits This exclusion applies to the following benefits. A ride in a commuter highway vehicle between the employee's home and work place. A transit pass. Qualified parking. Qualified bicycle commuting reimbursement. You may provide an employee with any one or more of the first three benefits at the same time. However, the exclusion for qualified bicycle commuting reimbursement isn't available in any month the employee receives any of the other qualified transportation benefits. |
Explain the HSI - why do markets sometimes appear in sync and other times not? | why do markets sometimes appear in sync, but during other times, not so much By "markets" I'm assuming you mean equity indices such as the HSI. Financial products fluctuate with respect to the supply/demand of the traders. There's been a large increase in the number of hedge funds, prop desks who trade relative values between financial products, that partially explains why these products seem to pick up "sync" when they get out of line for a while. |
What are the marks of poor investment advice? | If you see something that looks like a sales pitch, be skeptical, even if they sound informed, say things which resonate with your concerns and promise to alleviate your problems. Watch out in particular for people who pontificate about matters which are tangentially related to the investment (e.g. populist anti-Wall-Street sentiment). Beware limited-time opportunities, offers, and discounts. I'm specifically talking about your email pitches, Motley Fool. They're shameful. Remember you're allowed to change your mind and go back on something that you've said a few minutes ago. If anyone tries to trick you into agreeing to go along with them by taking what something you've said and manipulating it, or uses logic to demonstrate that you must buy something based on things you've said, tell them you're not comfortable, head for the door and don't look back. Don't be afraid of embarrassment or anything like that. (You can investigate whether your position is in fact logically consistent later.) Run away from anyone who resents or deprecates the notion of a second opinion. Don't ever go along with anything that seems shady: it may be shadier than you know. Some people thought Bernie Maddoff was doing some front-running on the side; turns out it was a Ponzi scheme. (Likewise the Ponzi scheme that devastated Albania's economy was widely suspected of being dirty, but people suspected more of a black-market angle.) Beware of anyone who is promising stability and protection. Insurance companies can sell you products (especially annuities) which can deliver it, but they're very expensive for what you get. Don't buy it unless you seriously need it. |
How do you find reasonably priced, quality, long lasting clothing? | According to this http://shine.yahoo.com/event/financiallyfit/cheapest-days-to-shop-online-2301854/ Tuesday is the best day of the week to buy men's apparel. |
How fast does the available amount of gold in the world increase due to mining? | Approximately 5.3 billion ounces have been mined. This puts the total value of all gold in the world at about $9.5 trillion, based on $1800/oz. Total world net worth was $125T in 2006. There's an odd thing that happens when one asset's value is suddenly such a large percent of all assets. (This reminds me of how and why the tech bubble burst. Cisco and EMC would have been worth more than all other stocks combined if they grew in the 00's like they did in the 90's.) Production (in 2005/6) ran about 80 million oz/yr. Just over 1.5% impact to total supply, so you are right in that observation. On the other hand, the limited amount out here, means that if everyone decided to put their wealth in gold, it would be done by driving the price to bubblicious levels. One can study this all day, and parse out how much is in investment form (as compared to jewelry, etc) and realize that a few trillion dollars in value pales in comparison to the wealth of the US alone, let alone the world. Half the world can't buy two oz if they tried. Of course there's pressure to reopen mines that had costs pushing $800/oz. Understand that the supply of $300 gold is long gone. As the easy gold has been mined, and cost goes up, there's a point where mines close. But as the price of gold trades at these levels, the mines that couldn't produce at $600 are now opening. |
Why do some people go through contortions to avoid paying taxes, yet spend money on expensive financial advice, high-interest loans, etc? | An example, where I live. When you buy a house, the seller wants 'black' money. This is because that way the seller pays less taxes. However, it's not smart for the buyer to pay in black, as the tax reductions are lower. Eventually, when the buyer tries to sell the house, he has to declare the difference, so a higher buy price should not have affected... apart from the notary minutes. |
What is the best asset allocation for a retirement portfolio, and why? | Take the easy approach - as suggested by John Bogle (founder of Vanguard - and a man worthy of tremendous respect). Two portfolios consisting of 1 index fund each. Invest your age% in the Fixed Income index fund. Invest (1-age)% in the stock index fund. Examples of these funds are the Total Market Index Fund (VTSMX) and the Total Bond Market Index (VBMFX). If you wish to be slightly more adventurous, blend (1-age-10)% as the Total Market Index Fund and a fixed 10% as Total International Stock Index (VGTSX). You will sleep well at night for most of your life. |
Not paying cash for a house | You could use the money to buy a couple of other (smaller) properties. Part of the rent of these properties would be used to cover the mortgage and the rest is income. |
Yahoo Finance shows incorrect data | Yes, I see the same problem. Google's version seems to be correct, however. |
Was this bill forgotten by a medical provider, and do notices need to be sent before collections? | Sometimes I think a question like this is one of moral versus legal. The reality is that you know you owe the money because you received the services. You're right that the bill should have been sent to you, and the natural urge for many people is to just count it in the win column when things like this happen and there's the chance to avoid paying. I suppose my question for you is, are you comfortable with the notion that you are not paying something that your heart of hearts tells you should be paid? If roles were reversed and you, as a business owner, had forgotten to bill something for which you were rightfully due payment, wouldn't you hope they'd have the integrity to pay you anyway? The legal side of this can be a bit trickier, and much depends on the state you're in (assuming you're in the U.S.) because some have stiffer consumer collection and protection laws than others. The rehab center could, when doing an audit of its accounts, discover that you didn't pay for these. They could take the polite course of action and call you with a gentle reminder or send a bill, or they could be not so nice about it. Either way, they can't send anything to collections for which you haven't been presented a bill and demonstrated an unwillingness to pay. There's a process in place, regardless of the state, so they can't just automatically put it into collections. I will close with this question for you: did the rehab center help you with what you needed, and are you healthier and better because of their care? If so, pay the bill. That's my advice. Keep in mind that unpaid medical costs just raise the prices for everyone else, because these providers will make up for the loss somewhere. I hope this helps. Good luck! |
Does it make any sense to directly contribute to reducing the US national debt? | At its heart, I think the best spirit of "donation" is helping others less fortunate than yourself. But as long as the US remains solvent, the chief benefit of paying down the national debt is - like paying off a credit card - lowering the future interest payments the U.S. taxpayer has to make. Since the wealthy pay a disproportionately large portion of taxes (per capita), your hard earned money would be disproportionately benefitting the wealthy. So I'd recommend you do one or both of the following: instead target your donations to a charity whose average beneficiary is less fortunate than yourself take political action with an aim towards balancing the federal budget (since the US national debt is principally financed in the form of 30 year treasuries, the U.S. will be completely out of debt if it can maintain a balanced budget for 30 years recanted, see below) |
Should I open a credit card when I turn 18 just to start a credit score? | No, don't open a credit card. Get used to paying cash for everything from the beginning. The best situation you can be in is not to have any credit. When it comes time to buy a house, put down %30 percent and your 0 credit score won't matter. This will keep you within your means, and, with governments gathering more and more data, help preserve your anonimity. |
Free service for automatic email stock alert when target price is met? | http://finance.yahoo.com/stock-alerts/stock-watch/add/?.done=/stock-alerts/ You will have to have a yahoo account. If you want to provide an alternative delivery email address, visit the URL above. Click "Stocks Watch", enter ticker(s) and price(s) at which you want alerts, then at the bottom select the "email" radio button. If your preferred email address is not listed, click the "Add an email address" link and follow the instructions. I don't know what their limit is, but I currently have three addresses set up -- two to non-@yahoo addresses -- and it works fine. |
How do I determine if sale proceeds from an asset are taxable? | Profit = Sale price - Basis Basis = Purchase price - any depreciation taken, including expensing it. |
Is candlestick charting an effective trading tool in timing the markets? | Candlesticks and TA are a relic of pre-computer trading, period. Market makers use sophisticated algorithms not for trading, but manipulations. |
Loan to son - how to get it back | A few ideas. I suggest it would wise to consider what lesson is learned as a result of any resolution of a financial issue. Is it a lesson of responsibility and of the importance of keeping one's word, or of getting away with whatever happens (poorly planned business) with no adverse consequences. "No" consequences (e.g. forgiven loan) is also a consequence, and it sends a message. Sounds like paying the loan from your savings automatically means it's deducted from inheritance, since the savings are part of that inheritance. This may seem like a square deal if we ignore inflation. Assuming Today the $54K is worth much more than, unless it is adjusted for inflation, the same $54K will be worth (i.e. will allow to buy) a few decades from now, when the inheritance materializes. So this option means your son is foregoing a significantly smaller financial loss in the future in exchange for foregoing his debt completely today. This is like borrowing $54K from a bank now, and only having to forego the same amount decades in the future when it is in fact worth much less. What borrower would not be happy with such arrangement, and what lender would do it? Only one's own loving parents :) You are in charge of what life lessons your son will walk away with from this situation. Good luck! |
Does it make sense to refinance a 30 year mortgage to 15 years? | You don't say what the time remaining on the current mortgage is, nor the expense of the refi. There are a number of traps when doing the math. Say you have 10 years left on a 6% mortgage, $200K balance. I offer you a 4% 30 year. No cost at all. A good-intentioned person would do some math as follows: Please look at this carefully. 6% vs 4%. But you're out of pocket far more on the 4% loan. ?? Which is better? The problem is that the comparison isn't apples to apples. What did I do? I took the remaining term and new rate. You see, so long as there are no prepayment penalties, this is the math to calculate the savings. Here, about $195/mo. That $195/mo is how you judge if the cost is worth it or the break-even time. $2000? Well, 10 months, then you are ahead. If you disclose the time remaining, I am happy to edit the answer to reflect your numbers, I'm just sharing the correct process for analysis. Disclosure - I recently did my last (?) refi to a 15yr fixed 3.5%. The bank let the HELOC stay. It's 2.5%, and rarely used. |
Do I need to report to FInCEN if I had greater than $10,000 worth of bitcoin in a foreign bitcoin exchange? | Firstly you have to know exactly what you are asking here. What you have if you "own" bitcoins is a private key that allows you to make a change to the blockchain that can assign a piece of information from yourself to the next person. Nothing more nothing less. The fact that this small piece of information is considered to have a market value, is a matter of opinion, and is analagous to owning a domain name. A domain name is an entry in a register, that has equal weight to all other entries, but the market determines if that information (eg: CocaCola.com) has any more value than say another less well know domain. Bitcoin is the same - an entry in a register, and the market decides which entry is more valuable than another. So what exactly are you wanting to declare to FinCEN? Are you willing to declare the ownership of private key? Of course not. So what then? An uncrackable private key can be generated at will by anyone, without even needing to "own" or transact in bitcoins, and that same private key would be equally valid on any of the 1000's of other bitcoin clones. The point I want to make is that owning a private key in itself is not valuable. Therefore you do not need, nor would anyone advise notifying FinCEN of that fact. To put this into context, every time you connect to online banking, your computer secretly generates a new random private key to secure your communications with the bank. Theoretically that same private key could also be used to sign a bitcoin transaction. Do you need to declare every private key your computer generates? No. Secondly, if you are using any of the latest generation of HD wallets, your private key changes with every single transaction. Are you seriously saying that you want to take it on your shoulders to inform FinCEN every time you move information (bitcoin amounts) around even in your own wallets? The fact is FinCEN could never "discover" your ownership of bitcoins (or any of the 1000s of alt coins) other than by you informing them of this fact. You may want to carefully consider the personal implications of starting down this road especially as all FinCEN would need to do is subpoena your bitcoin private key to steal your so-called funds, as they have done recently to other more prominent persons in the community. EDIT to clarify the points raised in comments. You do not own the private key to the bitcoins stored on a foreign exchange, nor can you discover it. The exchange owns the private key. You therefore do not either technically have control over the coins (MtGox is a very good example here - they went out of business because they allowed their private keys to be used by some other party who was able to siphon off the coins). Your balance is only yours when you own the private keys and the ability to spend. Any other situation you can neither recover the bitcoin to sell (to pay for any taxes due). So you do not either have the legal right nor the technical right to consider those coins in your possession. For those who do not understand the technical or legal implications of private key ownership, please do not speculate about what "owning" bitcoin actually means, or how ownership can be discovered. Holding Bitcoin is not illegal, and the US government who until recently were the single largest holder of Bitcoin demonstrate simply by this fact alone that there is nothing untoward here. |
Why does gold have value? | A lot of people probably don't agree with him, but Warren Buffett has some great quotes on why he doesn't invest in gold: I will say this about gold. If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today’s market prices about $7 trillion dollars – that’s probably about a third of the value of all the stocks in the United States…For $7 trillion dollars…you could have all the farmland in the United States, you could have about seven Exxon Mobils, and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally…Call me crazy, but I’ll take the farmland and the Exxon Mobils. And his classic quote: [Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head. |
What are my investment options in Australia? | If you want higher returns you may have to take on more risk. From lowest returns (and usually lower risk) to higher returns (and usually higher risk), Bank savings accounts, term deposits, on-line savings accounts, offset accounts (if you have a mortgage), fixed interest eg. Bonds, property and stock markets. If you want potentially higher returns then you can go for derivatives like options or CFDs, FX or Futures. These usually have higher risks again but as with any investments some risks can be partly managed. Also, CMC Markets charges $11 commission up to $10,000 trade. This is actually quite a low fee - based on your $7,000, $22 for in and out of a position would be less than 0.32% (of course you might want to buy into more than one company - so your brokerage would be slightly higher). Still this is way lower than full service brokerage which could be $100 or more in and then again out again. What ever you decide to do, get yourself educated first. |
As an American working in the UK, do I have to pay taxes on foreign income? | Yes. You do have to pay taxes in the UK as well but it depends on how much you have already been taxed in the US. http://taxaid.org.uk/situations/migrant-workernew-to-the-uk/income-from-abroad-arising-basis-vs-remittance-basis Say, you have to pay 20% tax in the UK for your earnings here. You ARE required to pay the same percentage on your foreign income as well. Now, if your "home" country already taxed you at 10% (for the sake of example), then you only need to pay the "remaining" 10% in the UK. However, the tax law in the UK does allow you to choose between "arising" basis and "remittance" basis on your income from the country you are domiciled in. What I have explained above is based on when income "arises." But the laws are complicated, and you are almost always better off by paying it on "arising" basis. |
Fund equalisation / dividend | What you are describing is a very specific case of the more general principle of how dividend payments work. Broadly speaking, if you own common shares in a corporation, you are a part owner of that corporation; you have the right to a % of all of that corporation's assets. The value in having that right is ultimately because the corporation will pay you dividends while it operates, and perhaps a final dividend when it liquidates at the end of its life. This is why your shares have value - because they give you ownership of the business itself. Now, assume you own 1k shares in a company with 100M shares, worth a total of $5B. You own 0.001% of the company, and each of your shares is worth $50; the total value of all your shares is $50k. Assume further that the value of the company includes $1B in cash. If the company pays out a dividend of $1B, it will now be only worth $4B. Your shares have just gone down in value by 20%! But, you have a right to 0.001% of the dividend, which equals a $10k cash payment to you. Your personal holdings are now $40k worth of shares, plus $10k in cash. Except for taxes, financial theory states that whether a corporation pays a dividend or not should not impact the value to the individual shareholder. The difference between a regular corporation and a mutual fund, is that the mutual fund is actually a pool of various investments, and it reports a breakdown of that pool to you in a different way. If you own shares directly in a corporation, the dividends you receive are called 'dividends', even if you bought them 1 minute before the ex-dividend date. But a payment from a mutual fund can be divided between, for example, a flow through of dividends, interest, or a return of capital. If you 'looked inside' your mutual fund you when you bought it, you would see that 40% of its value comes from stock A, 20% comes from stock B, etc etc., including maybe 1% of the value coming from a pile of cash the fund owns at the time you bought your units. In theory the mutual fund could set aside the cash it holds for current owners only, but then it would need to track everyone's cash-ownership on an individual basis, and there would be thousands of different 'unit classes' based on timing. For simplicity, the mutual fund just says "yes, when you bought $50k in units, we were 1/3 of the year towards paying out a $10k dividend. So of that $10k dividend, $3,333k of it is assumed to have been cash at the time you bought your shares. Instead of being an actual 'dividend', it is simply a return of capital." By doing this, the mutual fund is able to pay you your owed dividend [otherwise you would still have the same number of units but no cash, meaning you would lose overall value], without forcing you to be taxed on that payment. If the mutual fund didn't do this separate reporting, you would have paid $50k to buy $46,667k of shares and $3,333k of cash, and then you would have paid tax on that cash when it was returned to you. Note that this does not "falsely exaggerate the investment return", because a return of capital is not earnings; that's why it is reported separately. Note that a 'close-ended fund' is not a mutual fund, it is actually a single corporation. You own units in a mutual fund, giving you the rights to a proportion of all the fund's various investments. You own shares in a close-ended fund, just as you would own shares in any other corporation. The mutual fund passes along the interest, dividends, etc. from its investments on to you; the close-ended fund may pay dividends directly to its shareholders, based on its own internal dividend policy. |
What's the difference between stocks and shares? | For all practical purposes the words mean the same thing. Shares are just stock in a particular company whereas stock can refer to shares over many companies. Investopedia has a good explaination. If you are a financial journalist you might want to make sure you are using the right term at the right time, but otherwise they are synonyms. |
When a stock price rises, does the company get more money? | Not directly. But companies benefit in various ways from a higher stock price. One way a high stock price can hurt a company is that many companies do share buybacks when the price is too high. Economically speaking, a company should only buy back shares when those shares are undervalued. But, management may have incentives to do buybacks at irrationally high prices. |
Shareholder in US based company | Companies need to go public before you can buy their shares on a public stock exchange, but all companies have shares, even if there's only one share. And anyone who owns those shares can give them to whoever they like (there are generally restrictions on selling shares in unlisted companies to unsophisticated investors, but not on giving them away). |
If I plan to buy a car in cash, should I let the dealer know? | In the UK at least, dealers definitely want you to take finance. They get benefits from the bank (which are not insubstantial) for doing this; these benefits translate directly to increased commission and internal rewards for the individual salesman. It's conceivable that the salesman will be less inclined to put himself out for you in any way by sweetening your deal as much as you'd like, if he's not going to get incentives out of it. Indeed, since he's taking a hit on his commission from you paying in cash, it's in his best interests to perhaps be firmer with you during price negotiation. So, will the salesman be frustrated with you if you choose to pay in cash? Yes, absolutely, though this may manifest in different ways. In some cases the dealer will offer to pay off the finance for you allowing you to pay directly in cash while the dealer still gets the bank referral reward, so that everyone wins. This is a behind-the-scenes secret in the industry which is not made public for obvious reasons (it's arguably verging on fraud). If the salesman likes you and trusts you then you may be able to get such an arrangement. If this does not seem likely to occur, I would not go out of my way to disclose that I am planning to pay with cash. That being said, you'll usually be asked very early on whether you are seeking to pay cash or credit (the salesman wants to know for the reasons outlined above) and there is little use lying about it when you're shortly going to have to come clean anyway. |
Tax implications of diversification | Yes, to change which stocks you owe you need to sell one and buy the other, which for tax purposes means taking the profit or loss accrued up to then. On the other hand this establishes a new baseline, so you will not be double-faced on those gains. It just makes a mess of this year's tax return, and forced you to set aside some if the money to cover that. |
What to do when a job offer is made but with a salary less than what was asked for? | In my experience of doing software development for a little longer than I care to remember, salaries are always assumed to be negotiable. I know you said you don't like haggling (a lot of people don't) but you'll have to get used to that and you might have to be a little more flexible. Being able to negotiate something as important as your salary is a very important skill. That said, there might be several reasons why they're not willing to offer more: Here's what I would do: |
Why does the share price tend to fall if a company's profits decrease, yet remain positive? | You are omitting how the company made 120 million in the previous year and may be facing a shrinking market and thus have poor future prospects. If the company is shrinking, what will the shares be worth down the road. Remember companies like AOL or Blackberry? There was a time they had big profits before things changed which is the part you aren't considering here. If the company has lost something big on its earnings, e.g. the oil wells it owned have run out of reserves or the patents on its key drugs have expired, then there could be the perception that the company won't be able to compete in the future to continue to deliver earnings. Some companies may well end up going broke as one could look at GM for a company that used to be one of the largest car companies in the world and yet it ended up going broke. |
Do common stocks and preferred stocks have any differences in terms of percentage of the company per unit they represent? | Typically, preferred shares come with one or both different benefits - a disproportionate share of votes, say 10 votes per share vs the normal 1, or a preferred dividend. The vote preference is great for the owner(s) looking to go public, but not lose control of the company. Say, I am a Walton (of Walmart fame) and when I went public, I sold 80% of the (1000 share total) company. But, in creating the share structure, 20% of shares were assigned 10 votes each. 800 shares now trade with 800 votes, 200 shares have 10 votes each or 2000 votes. So, there are still the 1000 shares but 2800 votes. The 20% of shares now have 2000/2800 or 71% of the total votes. So, my shares are just less than half ownership, but over 78% of votes. Preferred dividend is as simple as that, buy Stock A for ownership, or (same company) Stock A preferred shares which have ownership and $1/yr dividend. Edited to show a bit more math. I use a simple example to call out a total 1000 shares. The percentages would be the same for a million or billion shares if 20% were a 10 vote preferred. |
Which types of insurances do I need to buy? | Can you afford to replace your home if it suffers major damage in a fire or earthquake? Is your home at risk of flooding? In the United States, one can purchase insurance for each of these risks, but the customer has to ask about each of them. (Most default American homeowners policies cover fire and wind damage, but not earthquake or flooding. I am not sure about hurricane or tornado damage.) Your most cost-effective insurance against fire, earthquake, or flood damage is to prevent or minimize such damage. Practical measures cannot completely eliminate these risks, so homeowners' insurance is still a good idea (unless you are so rich you can easily afford to replace your home). But you can do things like: Your most cost-effective health insurance is to have clean water, wash your hands before handling food, eat healthily (including enough protein, vitamins, and minerals), exercise regularly, and not smoke. Your medical insurance can cover some of the inevitable large medical expenses, but cannot make you healthy. |
Do I need another health insurance policy? | Most of the points by MrChrister are valid. I can't say much for Philippines, however there is a reason for one to go with individual insurance from my experience in India. |
When should I start saving/investing for my retirement? | My basic rule I tell everyone who will listen is to always live like you're a college student - if you could make it on $20k a year, when you get your first "real" job at $40k (eg), put all the rest into savings to start (401(k), IRA, etc). Gradually increase your lifestyle expenses after you hit major savings goals (3+ month emergency fund, house down payment, etc). Any time you get a raise, start by socking it all into your employer's 401(k) or similar. And repeat the above advice. |
Calculating the profit earned from a leveraged futures contract | I'm not entirely sure about some of the details in your question, since I think you meant to use $10,000 as the value of the futures contract and $3 as the value of the underlying stock. Those numbers would make more sense. That being said, I can give you a simple example of how to calculate the profit and loss from a leveraged futures contract. For the sake of simplicity, I'll use a well-known futures contract: the E-mini S&P500 contract. Each E-mini is worth $50 times the value of the S&P 500 index and has a tick size of 0.25, so the minimum price change is 0.25 * $50 = $12.50. Here's an example. Say the current value of the S&P500 is 1,600; the value of each contract is therefore $50 * 1,600 = $80,000. You purchase one contract on margin, with an initial margin requirement1 of 5%, or $4,000. If the S&P 500 index rises to 1,610, the value of your futures contract increases to $50 * 1,610 = $80,500. Once you return the 80,000 - 4,000 = $76,000 that you borrowed as leverage, your profit is 80,500 - 76,000 = $4,500. Since you used $4,000 of your own funds as an initial margin, your profit, excluding commissions is 4,500 - 4,000 = $500, which is a 500/4000 = 12.5% return. If the index dropped to 1,580, the value of your futures contract decreases to $50 * 1,580 = $79,000. After you return the $76,000 in leverage, you're left with $3,000, or a net loss of (3,000 - 4000)/(4000) = -25%. The math illustrates why using leverage increases your risk, but also increases your potential for return. Consider the first scenario, in which the index increases to 1,610. If you had forgone using margin and spent $80,000 of your own funds, your profit would be (80,500 - 80,000) / 80000 = .625%. This is smaller than your leveraged profit by a factor of 20, the inverse of the margin requirement (.625% / .05 = 12.5%). In this case, the use of leverage dramatically increased your rate of return. However, in the case of a decrease, you spent $80,000, but gained $79,000, for a loss of only 1.25%. This is 20 times smaller in magnitude than your negative return when using leverage. By forgoing leverage, you've decreased your opportunity for upside, but also decreased your downside risk. 1) For futures contracts, the margin requirements are set by the exchange, which is CME group, in the case of the E-mini. The 5% in my example is higher than the actual margin requirement, which is currently $3,850 USD per contract, but it keeps the numbers simple. Also note that CME group refers to the initial margin as the performance bond instead. |
How can I stop a merchant from charging a credit card processing fee? | You can report the violation to the payment network (i.e., Mastercard or Visa). For instance here is a report form for Visa and here is one for MasterCard. I just found those by googling; there are no doubt other ways of contacting the companies. Needless to say, you shouldn't expect that this will result in an immediate hammer of justice being brought down on the merchant. Given the presence of large-scale fraud schemes, it's unlikely Visa is going to come after every little corner store owner who charges a naughty 50-cent surcharge. It is also unlikely that threatening to do this will scare the merchant enough to get them to drop the fee on your individual transaction. (Many times the cashier will be someone who has no idea how the process actually works, and won't even understand the threat.) However, this is the real solution in that it allows the payment networks to track these violations, and (at least in theory) they could come after the merchant if they notice a lot of violations. |
Can I prove having savings without giving out the account number? | Giving out your bank account number is not generally a security problem. The first time you write your landlord a security deposit or rent check, he'll have your account number. (It's printed on the check.) That having been said, in my experience, banks do not generally give out balance information to just anyone who calls them up and gives them an account number. Have you asked the landlord what he needs? Perhaps showing him a printout of a recent bank statement is enough. |
Are there any countries where citizens are free to use any currency? | Shops in most touristic places tend to accept major currencies (at least dollar and euro). I remember a trip in Istanbul before the euro existed, the kids selling postcards near the blue mosque were able to guess your country and announce in your language the price in your currency. |
Reason for “qualified” buyer requirements to exercise stock options/rights spun off from parent company? | Accredited investors are required to have 1 million in assets (not including primary residence) or $200,000/yr income for the last 3 years. These kinds of regulations come from the SEC, not the company involved, which means the SEC thinks it's a risky investment. If I recall correctly, [someone I know] had to submit evidence of being an accredited investor to trade options on [his] IRA. It may be that this is related to the classification of the options. |
What can I replace Microsoft Money with, now that MS has abandoned it? | www.mint.com is a very good web site that can upload your financial data from your bank and analyze it for you. Security concerns seem to have been addressed reassuringly. |
How can all these countries owe so much money? Why & where did they borrow it from? | They borrowed it from the people, and typically to finance wars and military spending. For example, Wikipedia suggests that the Bank of England "was set up to supply money to the King. £1.2m was raised in 12 days; half of this was used to rebuild the Navy." It's a game that everyone has to play once started; if Napoleon buys an army on credit, you'll have to raise an equal amount or face quite a problem. As for why they've grown so large, it's because governments are quite skilled at owing large sums of money. Only a small portion of the debt comes due in full at a given moment, and they constantly reissue new debt via auction to keep it rolling. So as long as they can make coupon (interest) and the lump sum at maturity, it's not difficult to keep up. Imagine how much credit card debt you could rack up if you only ever had to pay interest. This game will continue for as long as people lend. And there are plenty of lenders. There's pensions, mutual funds and endowments, which find public debt typically safer than stocks. And money market funds, which target 1 dollar NAV and only invest in the "safest" AAA-rated bonds to protect it. There's central banks, which can buy and sell public debt to manipulate inflation and exchange rates. Absent some kind of UN resolution to ban lending, or perhaps a EU mandated balanced budget, these debts will likely continue to grow. You think they "collectively owe more money than can exist", but there's a lot of wealth in the world. Most nations owe less than a year's GDP. For example, the US's total wealth is in the neighborhood of 50 trillion. |
Can I deduct the cost of software and/or computer that I need to do my job? | Yes, this is a miscellaneous itemized deduction. https://www.irs.gov/publications/p529/ar02.html For this to impact your taxes, you have to be itemizing deductions (have total deductions greater than standard deduction), and the total of all miscellaneous deductions needs to exceed the "2% floor" described in the IRS link above. |
Do “Instant Approved” credit card inquires appear on credit report? | Businesses you are already established with may do a soft pull to pre-qualify you for an offer. They store the information and if you accept, may instantly setup and account. You may also see language to the effect that they may do an inquiry (hard pull) - I guess if their data is old. When you went outside of Amazon to Chase, they did a hard pull on their side which is what you saw. |
In the UK, could low-income pensioners (or those near a low-income retirement) find a student loan useful for boosting their finances? | In theory - Yes. So as long as someone will accept you as a (very) mature student, you plan to never earn over 21k a year for the next 30 years (no longer wiped out at 65), you could get a loan, slightly unethically (unless you fancy doing the course). Also if you did have to start paying it back - since interest rates are currently 6.1% this means the loan is doubling potentially just under every 12 years (approx) As to the side question of is it fraud? I couldn't say. Is a student getting maximum loans but planning on being a jobless bum for the rest of their lives and never paying back loans also committing fraud? One could argue Yes, but i don't believe a lack of ambition is currently illegal. |
Is this formula accurate for weighing the difference between an S-Corp and LLC? | It might be best to step back and look at the core information first. You're evaluating an LLC vs a Corporation (both corporate entities). Both have one or more members, and both are seen similarly (emphasis on SIMILAR here, they're not all the same) to the IRS. Specifically, LLC's can opt for a pass-through tax system, basically seen by the IRS the same way an S-Corp is. Put another way, you can be taxed as a corporate entity, or it's P/L statements can "flow through" to your personal taxes. When you opt for a flow-through, the business files and you get a separate schedule to tie into your taxes. You should also look at filing a business expense schedule (Schedule C) on your taxes to claim legitimate business expenses (good reference point here). While there are several differences (see this, and this, and this) between these entities, the best determination on which structure is best for you is usually if you have full time employ while you're running the business. S corps limit shares, shareholders and some deductions, but taxes are only paid by the shareholders. C corps have employees, no restrictions on types or number of stock, and no restrictions on the number of shareholders. However, this means you would become an employee of your business (you have to draw monies from somewhere) and would be subject to paying taxes on your income, both as an individual, and as a business (employment taxes such as Social Security, Medicare, etc). From the broad view of the IRS, in most cases an LLC and a Corp are the same type of entity (tax wise). In fact, most of the differences between LLCs and Corps occur in how Profits/losses are distributed between members (LLCs are arbitrary to a point, and Corps base this on shares). Back to your question IMHO, you should opt for an LLC. This allows you to work out a partnership with your co-worker, and allows you to disburse funds in a more flexible manner. From Wikipedia : A limited liability company with multiple members that elects to be taxed as partnership may specially allocate the members' distributive share of income, gain, loss, deduction, or credit via the company operating agreement on a basis other than the ownership percentage of each member so long as the rules contained in Treasury Regulation (26 CFR) 1.704-1 are met. S corporations may not specially allocate profits, losses and other tax items under US tax law. Hope this helps, please do let me know if you have further questions. As always, this is not legal or tax advice, just what I've learned in setting several LLCs and Corporate structures up over the years. EDIT: As far as your formulas go, the tax rate will be based upon your personal income, for any pass through entity. This means that the same monies earned from and LLC or an S-corp, with the same expenses and the same pass-through options will be taxed the same. More reading: LLC and the law (Google Group) |
Is compounding interest on investments a myth? | Compound growth isn't a myth, it just takes patience to experience. A 10% annual return will double the investment not in 10 years, but just over 7. Even though a mortgage claims to use simple interest, if your loan is 5% and there's 14 years to go, $100 extra principal will knock off $200 from the final payment. The same laws of compounding and Rule of 72 are at play. |
Retirement Savings vs. Student Loan payments | Your plan sounds quite sound to me. I think that between the choices of [$800 for Loans, $300 for Retirement] and [$1100 for loans], both are good choices and you aren't going to go wrong either way. Some of the factors you might want to consider: I like your retirement savings choices - I myself use the admiral version of VOO, plus a slightly specialized but still large ETF that allows me to do a bit of shifting. Having something that's at least a bit counter-market can be helpful for balancing (so something that will be going up some when the market overall is down some); I wouldn't necessarily do bonds at your age, but international markets are good for that, or a stock ETF that's more stable than the overall market. If you're using Vanguard, look at the minimums for buying Admiral shares (usually a few grand) and aim to get those if possible, as they have significantly lower fees - though VOO seems to pretty much tie the admiral version (VFIAX) so in that case it may not matter so much. As far as the target retirement funds, you can certainly do those, but I prefer not to; they have somewhat higher (though for Vanguard not crazy high) expense ratios. Realistically you can do the same yourself quite easily. |
Paying over the minimum mortgage payment | take a look at this graph here: http://mortgagevista.com/#m=1&a=40000&b=4&c=30y&B&oa&ob&oc&od It shows how much it costs to borrow $40k for 30 years. You did not post your mortgage rate or loan term, so I used 4% over 30 years (you can easily update this with your actual details). While this does not show the costs of your total mortgage, it does help you get an idea of just how much the 40k$ in question is costing you in interest. If you hover over the month one year from now you will see that you will have paid around $1587 in interest over the course of the year. If you were to put the full 40k$ toward your mortgage right now, you would avoid having to pay this interest over the next year. The next question I think you would have to ask yourself is if there is anything else you could do with that money that is worth more than the $1587 to you. Is it worth $1587 to keep those funds liquid/available in case you need to use them for something else? Could you find other investments you feel comfortable with that could earn you more than $1587? Is it worth the hassle/risk of investing the funds somewhere else with a better return? If you can't come up with anything better to do with the money then yes, you should probably use the funds (or at least part of them) towards the mortgage. |
What is the contribution limit for a SEP-IRA? | Both are saying essentially the same thing. The Forbes articles says "as much as 20% [...] up to a maximum of $50,000". This means the same as what the IRS page when it says the lesser of a percentage of your income or a total of $53,000. In other words, the $53k is a cap: you can contribute a percentage of your earnings, but you can never contribute more than $53k, even if you make so much money that 20% of your earnings would be more than that. (The difference between 20% and 25% in the two sources appears to reflect a difference in contribution limits depending on whether you are making contributions for employees, or for yourself as a self-employed individual; see Publication 560. The difference between $50k and $53k is due to the two pages being written in different years; the limits increase each year.) |
Advantages/Disadvantages to refinancing online? | If you've been in your house for a few years (and have built some equity up) and the market is active in your area, online is probably fine. The local banks will be better if it's not obvious to someone in Bangor, ME that your neighborhood in San Diego is worth substantially more than the crappy area 2 miles away. I've had 3 mortgages, one from a regional bank, one from a broker-sourced national mortgage company and another from a local bank. The bigger banks had better statements and were easier to do stuff with online. The smaller bank has been a better overall value, because the closing costs were low and they waived some customary fees. In my case, the national mortgage company had a better APR, but my time horizon for staying in the house made the smaller bank (which had a competitive APR, about a half point higher than the lowest advertised) a better value due to much lower up-front costs. |
How to deal with the credit card debt from family member that has passed away? | First, if it is in any way a joint account, the debt usually goes to the surviving person. Assets in joint accounts usually have their own instructions on how to disperse the assets; for example, full joint bank accounts usually immediately go to the other name on the account and never become part of the estate. Non-cash assets will likely need to be converted to cash and a fair market valuation shown to the probate court, unless the debts can be paid without using them and they can be transferred to next of kin. If, after that, the deceased has any assets at all, there is usually (varies by state) a legally defined order in which debtor types must be paid. This is handled by probating the estate. There is a period during which you publish a death notice and then wait for debt claims and bills to arrive. Then pay as many as possible based on the priority, and inform the others the holder is deceased and the estate is empty. This sometimes needs to be approved by a judge if the assets are less than the debts. Then disperse remaining assets to next of kin. If there are no assets held by just the deceased, as you get bills you just send a certified copy of the death certificate, tell them there is no estate, then forget about them. A lawyer can really help in determining which need to be paid and to work through probate, which is not simple or cheap. But also note that you can negotiate and sometimes get them to accept less, if there are assets. When my mother died, the doctors treating her zeroed her accounts; the hospitals accepted a much reduced total, but the credit cards wanted 100%. |
Why is RSU tax basis based on remaining shares after shares are witheld? | Here is how it should look: 100 shares of restricted stock (RSU) vest. 25 shares sold to pay for taxes. W2 (and probably paycheck) shows your income going up by 100 shares worth and your taxes withheld going up by 25 shares worth. Now you own 75 shares with after-tax money. If you stop here, there would be no stock sale and no tax issues. You'd have just earned W2 income and withheld taxes through your W2 job. Now, when you sell those 75 shares whether it is the same day or years later, the basis for those 75 shares is adjusted by the amount that went in to your W2. So if they were bought for $20, your adjusted basis would be 75*$20. |
How can one relatively easily show that low expense ratio funds outperform high expense ratio funds? | I hope a wall of text with citations qualifies as "relatively easy." Many of these studies are worth quoting at length. Long story short, a great deal of research has found that actively-managed funds underperform market indexes and passively-managed funds because of their high turnover and higher fees, among other factors. Longer answer: Chris is right in stating that survivorship bias presents a problem for such research; however, there are several academic papers that address the survivorship problem, as well as the wider subject of active vs. passive performance. I'll try to provide a brief summary of some of the relevant literature. The seminal paper that started the debate is Michael Jensen's 1968 paper titled "The Performance of Mutual Funds in the Period 1945-1964". This is the paper where Jensen's alpha, the ubiquitous measure of the performance of mutual fund managers, was first defined. Using a dataset of 115 mutual fund managers, Jensen finds that The evidence on mutual fund performance indicates not only that these 115 mutual funds were on average not able to predict security prices well enough to outperform a buy-the-market-and-hold policy, but also that there is very little evidence that any individual fund was able to do significantly better than that which we expected from mere random chance. Although this paper doesn't address problems of survivorship, it's notable because, among other points, it found that managers who actively picked stocks performed worse even when fund expenses were ignored. Since actively-managed funds tend to have higher expenses than passive funds, the actual picture looks even worse for actively managed funds. A more recent paper on the subject, which draws similar conclusions, is Martin Gruber's 1996 paper "Another puzzle: The growth in actively managed mutual funds". Gruber calls it "a puzzle" that investors still invest in actively-managed funds, given that their performance on average has been inferior to that of index funds. He addresses survivorship bias by tracking funds across the entire sample, including through mergers. Since most mutual funds that disappear are merged into existing funds, he assumes that investors in a fund that disappear choose to continue investing their money in the fund that resulted from the merger. Using this assumption and standard measures of mutual fund performance, Gruber finds that mutual funds underperform an appropriately weighted average of the indices by about 65 basis points per year. Expense ratios for my sample averaged 113 basis points a year. These numbers suggest that active management adds value, but that mutual funds charge the investor more than the value added. Another nice paper is Mark Carhart's 1997 paper "On persistence in mutual fund performance" uses a sample free of survivorship bias because it includes "all known equity funds over this period." It's worth quoting parts of this paper in full: I demonstrate that expenses have at least a one-for-one negative impact on fund performance, and that turnover also negatively impacts performance. ... Trading reduces performance by approximately 0.95% of the trade's market value. In reference to expense ratios and other fees, Carhart finds that The investment costs of expense ratios, transaction costs, and load fees all have a direct, negative impact on performance. The study also finds that funds with abnormally high returns last year usually have higher-than-expected returns next year, but not in the following years, because of momentum effects. Lest you think the news is all bad, Russ Wermer's 2000 study "Mutual fund performance: An empirical decomposition into stock‐picking talent, style, transactions costs, and expenses" provides an interesting result. He finds that many actively-managed mutual funds hold stocks that outperform the market, even though the net return of the funds themselves underperforms passive funds and the market itself. On a net-return level, the funds underperform broad market indexes by one percent a year. Of the 2.3% difference between the returns on stock holdings and the net returns of the funds, 0.7% per year is due to the lower average returns of the nonstock holdings of the funds during the period (relative to stocks). The remaining 1.6% per year is split almost evenly between the expense ratios and the transaction costs of the funds. The final paper I'll cite is a 2008 paper by Fama and French (of the Fama-French model covered in business schools) titled, appropriately, "Mutual Fund Performance". The paper is pretty technical, and somewhat above my level at this time of night, but the authors state one of their conclusions bluntly quite early on: After costs (that is, in terms of net returns to investors) active investment is a negative sum game. Emphasis mine. In short, expense ratios, transaction costs, and other fees quickly diminish the returns to active investment. They find that The [value-weight] portfolio of mutual funds that invest primarily in U.S. equities is close to the market portfolio, and estimated before fees and expenses, its alpha is close to zero. Since the [value-weight] portfolio of funds produces an α close to zero in gross returns, the alpha estimated on the net returns to investors is negative by about the amount of fees and expenses. This implies that the higher the fees, the farther alpha decreases below zero. Since actively-managed mutual funds tend to have higher expense ratios than passively-managed index funds, it's safe to say that their net return to the investor is worse than a market index itself. I don't know of any free datasets that would allow you to research this, but one highly-regarded commercial dataset is the CRSP Survivor-Bias-Free US Mutual Fund Database from the Center for Research in Security Prices at the University of Chicago. In financial research, CRSP is one of the "gold standards" for historical market data, so if you can access that data (perhaps for a firm or academic institution, if you're affiliated with one that has access), it's one way you could run some numbers yourself. |
Difference between Edward Jones or Betterment | Instead of saying which one is better, which is too subjective, I think it is more important to understand what these institutions are. They are kind of different animals. Edward Jones pretty much a full service wealth manager. They meet with you in person, advise you on what retirement and savings accounts to get, they talk to you to evaluate your risk preferences. They will talk to you about planning for your kids' college and about your insurance situation. They will probably attend your kids' bar mitzvahs and stuff too. Of course, this isn't free. With Edward Jones you will pay a fixed percentage of your managed wealth to them every year. And they will likely put your money in expensive mutual funds. And those mutual funds will charge a special 12b-1 fee, which is a kickback to the wealth manager. Plan on giving 2% or so of your total wealth to the manager per year, plus whatever the mutual funds charge. I don't have experience with Betterment, but they appear to be a robo advisor. Robo advisors attempt to do the same kinds of things as wealth managers, but rely on computer algorithms and web pages to give you advice whenever possible. This makes some sense because most people aren't actually that special in terms of their financial situation. I don't know their cost structure, but presumably it will be significantly cheaper than Edward Jones. They will almost certainly put you in cheaper funds (index funds and ETF's). Think of it as a cost-conscious alternative to Edward Jones. Vanguard is a discount broker and a mutual fund family. Their funds are among the biggest and cheapest in the world. Fees on many of these funds will be a fraction of the equivalent funds Edward Jones will put you in. They will charge you nothing at all to manage your money. They will give you some assistance and advice if you call them but don't expect any house calls. They aren't particularly in the business of giving advice. If you know what you want to invest in, this is the cheapest way to do it by far. Basically you won't have to pay anything at all except the actual cost of the assets you are investing in. Which is the best? Depends on your own preferences and ability. If you do not want to learn about personal finance and don't particularly care about whether you are getting the best return--if you don't mind paying for a personal touch--Edward Jones might be a good choice. For most people who are comfortable asking this type of question online and interested in learning about finance even a little bit, I'd expect that Betterment or Vanguard will be a better choice. For people who are willing to learn a bit of finance and manage their own affairs, using Vanguard (or a close competitor, like Fidelity) will ultimately result in the most wealth generated (the least given away to the financial industry). |
I spend too much money. How can I get on the path to a frugal lifestyle? | My father imparted this advice to me when I was a teenager, and it hasn't failed me yet. > Pay yourself first What this means is that the first "bill" you pay should always be your savings. Preferably in a way that automatically comes out of your paycheck or account without requiring you to take an active step to make it happen. I save a ton of money, but I am no more disciplined than anyone else. I just realized that over the years of progressing in my career that I gradually got higher and higher salaries, yet never had a substantial increase in the money I had leftover in my bank at the end of the month despite the fact that I make about 8x the money I used to live reasonably comfortably on. Therein is the point, we spend whatever money we see, so you almost have to hide it from yourself. First, participate to the fullest in your company's 401k if they offer it. After a while you will adjust naturally to the net take home pay and won't miss the savings you are accumulating. Absent that, or in addition to that, set up a separate bank or investment account and arrange an automatic transfer from your checking account every month. Then set up automatic investing in CD's or some other less-liquid-than-cash investment so you it is just enough hassle to get at the money that you won't do it on a whim. It sounds too simple, but it works. |
Getting correlation from regression slope (Completely stumped) | I just used the formula in below link and did some math. I have that book too but haven't looked at it yet really. Lots of maths to have fun with. Let me know if this is correct or needs fixing. Source: http://wiki.fool.com/How_to_Calculate_Beta_From_Volatility_%26_Correlation |
Connection between gambling and trading on stock/options/Forex markets | There is economic value added to the marketplace, by having many investors trading stocks. The stock market itself can be thought of as a tool which provides additional 'liquidity' to the marketplace. Liquidity is the ease with which you can convert your assets into cash (for example, how quickly could you sell your car if you needed money to pay a medical bill?). Without a stock market, funds would be very illiquid - an investor would likely need to post advertisements to have other people consider buying his/her shares. Until the match between a buyer and seller is found, the person with the shares can't use the cash they need. On the other side of the transaction, are people who have an appetite for risk. This means that, for various reasons, they are willing to take on more risk than you, if it pays off on average (they are young [and have many years of salary earnings in front of them], or they are rich [can afford to lose money sometimes if it pays off on average]). Consider this like a transaction between your insurance broker - you don't want to pay for a new car if you get in an accident, and you're willing to pay total annual premiums that, on average, will cost more than that same car over time. You don't want the risk, but the insurance company does - that's how they make money. So by participating in any marketplace, you are providing value, in the form of liquidity, and by allowing the market to allocate risk to those willing to take it on. |
Is it possible to trade CFD without leverage? | You can but there is no point trading CFD's seeing you may still lose more than your investment due to slippage |
How much life insurance do I need? | Life Insurance can be a difficult decision. We have to first assess the "want" for it vs. the "need" for it, and that differs from person to person. Any Life licensed agent should be happy to do this calculation for you at no cost and no obligation. Just be sure you are well educated in the subject to make sure they are looking after YOUR needs and not their wallets. For the majority of clients, when looking at "needs" we will be sure to look at income coverage (less what the household needs with one less body) as well as debt coverage, education costs etc. More importantly make sure you are buying the RIGHT insurance, as much as the right amount. |
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